According
to a "geo-economic" and "geo-political" meta-narrative (Jessop 1997)
whose elements have become widely familiar and largely unquestioned
over the last couple of years, globalization, the shift to a post-Fordist
regime of production and the crisis of the Keynesian welfare state have,
since the 1970s, ushered in an era of new subsidiarity, characterized
by enhanced local autonomy and innovative forms of urban governance.
The contours of an emerging Schumpeterian workfare or competitive state
are best exemplified - or so the argument goes - by the new phenomenon
of entrepreneurial cities.
A variety of theoretical perspectives now supports this meta-narrative.
Neo-Schumpeterians like Christopher Freeman and Carlota Perez, neo-Smithians
like Michael Piore and Charles Sabel, and regulationists like Michel
Aglietta, Robert Boyer and Alain Lipietz are among its most prominent
voices. But the descriptive and explanatory aspects of the narrative
have also trickled down to the political discourse and are widely shared
between Left and Right. Both the academic literature and the political
discourse seem to be particularly fascinated by the hypothesis of a
new subsidiarity and of "bringing cities back in" as economic units
and political actors, main sites and protagonists of the transition
to a new phase of capitalist development and to a changed architecture
of the state. While political economy has discovered the local sphere,
urban sociology has begun to theorize the context of urban governance.
And the idea of "small is beautiful", which nicely dovetails with arguments
relating to post-modern and post-materialist trends, also seems to hold
promise for both New Left and New Right reform strategies. Yet like
any meta-narrative, this "new orthodoxy" (Tomaney 1994) should not be
taken at face value and invites a critical reading of its underlying
empirical and theoretical basis. The narrative is located at a very
high level of abstraction, mixes empirical and normative claims, and
is fraught with contradictions and ambiguities. The presentation will
examine the main arguments and varieties of the discourse on new subsidiarity,
probe into its empirical and theoretical deficits, and outline the elements
of a more grounded and cautious theoretical perspective focusing on
the role of historical path dependence, context, and the institutional
structure of the local state. The case for an institutional perspective
on trends in local autonomy and urban governance is made with examples
drawn from my own research on cities and urban regions in the United
States and Canada. The following pages develop a few preliminary thoughts
along these lines.

I

There
is now widespread consensus on the combination of economic and political
factors that enabled the Western industrialized countries to recover
from the Great Depression and to enjoy three decades of unprecedented
growth and stability after 1945. According to the standard account,
this phase of capitalist development was, national variations notwithstanding,
based on Fordist mass production and its macroeconomic regulation in
and through the Keynesian welfare state. The logic of the Fordist-Keynesian
paradigm was tied to national, demand and employment oriented macroeconomic
regulation even though it was embedded in a specific international order,
characterized by United States dominance, the Bretton Woods system and
first steps towards trade liberalization, and also entailed specific
functions for urban regions and local governments.
The urban regions around industrial cities were the main sites, and
the phenomenon of suburbanization - often actively encouraged by national
housing and transportation policies - was an important element of the
"virtuous circle" of mass production and mass consumption that sustained
economic growth and stability in the postwar era. Yet local variations
in the forms of production and consumption are considered as largely
irrelevant in the literature, and local governments are described as
having a subordinate role during that time - namely, as local arm of
the Keynesian welfare state, responsible for providing the infrastructure
of Fordist mass production, administering the welfare programs of central
governments, and organizing social consumption.

Still
according to the standard account represented by the neo-Schumpeterian,
neo-Smithian or regulationist perspectives, the crisis of the Fordist-Keynesian
paradigm, which first materialized in the economic symptoms of rising
unemployment and stagflation during the 1970s, was due to structural
rather than cyclical reasons. The technological innovations of the fifth
Kondratiev and the growing saturation, fragmentation and volatility
of the markets for mass-produced goods not only made new forms of production
and a range of new goods possible, but also represented problems of
micro- and macroeconomic regulation for which the Fordist-Keynesian
paradigm had no answers.
These structural problems led enterprises onto a search for business
strategies and forms of production that would prove viable in the context
of heightened instability. One such path was the globalization of trade,
finance and production - in other words, globalization can be qualified
as the attempt of emerging transnational corporations to expand the
microeconomic regulation of the Fordist regime to the global level,
and hence as shift to a neo- rather than genuinely post-Fordist regime
of production.
Yet most of the relevant literature has drawn our attention to the fact
that globalization, while disintegrating national economies, has strongly
differential spatial consequences and hence underlines the importance
of "place" as analytical category. Regional economies are integrated
into the new world economy to a bigger or lesser extent, as centre or
periphery, and in varying functions. Secondly, the literature has drawn
our attention to the fact that unless supported by global arrangements
of macroeconomic regulation, the neo-Fordist regime of production might
not be sustainable. These related ideas are tied to two contrasting,
although not strictly mutually exclusive scenarios relating to the global-local
nexus and to the economic structure and role of cities in the new world
economy.
In the first scenario, which has been elaborated by the research on
world cities, an international hierarchy of urban regions serves as
basing points for transnational capital, assuming control functions
for global players and providing them with the high-level producer services
on which the neo-Fordist expansion of mass production to the new world
economy relies. This scenario involves economic and social polarization
- (1) between the "archipelago" of world cities and the periphery that
it controls and (2) within world cities between the highly qualified,
affluent core and the unqualified, impoverished margins of the labour
force.
In the second scenario, which was first described by Michael Piore and
Charles Sabel, urban regions (industrial districts) are the main geographical
focus of an alternative mode of production, flexible specialization
or craft production, thought to avoid the inherent problems of the neo-Fordist
regime, and hence to represent a genuinely post-Fordist trajectory.
Flexible specialization is described as a mode of production that is
based on a balance of competition and cooperation between small and
medium-sized enterprises, embedded in closely-knit communities and sustained
by mutual trust, that fosters permanent innovation in production technologies
and the specialized goods produced. This is a much more benign view
of the emerging regime as far as labour relations and the danger of
polarization are concerned.
The political aspects and implications of the crisis are analyzed in
a similar fashion by the standard account. Thus the internal flaws of
the Keynesian welfare state are said to be among the factors that undermine
the Fordist regime - "government overload" and the alleged clash between
accumulation and legitimation functions of the state are key concepts
in this regard. Conversely, the demise of the Fordist regime is said
to have forced a transformation of the state, changes in the scope and
content of economic and social policies, and new forms of governance.
Hence while globalization eroded national macroeconomic regulation and
the bureaucratized provision of welfare services "from above", the growing
fragmentation and volatility of markets, as well as the pluralization
of needs and tastes, did so "from below".
The emerging workfare or competitive state is called Schumpeterian because
it is thought to shift the focus of state intervention from demand and
employment oriented to supply and innovation oriented policies, thus
ensuring the flexibility and competitive advantages of national or regional
economies. Social and redistributive policies are pushed back or "re-commodified"
in line with these goals and objectives. This reorientation - or so
the argument goes - also entails changes in governance (1) along the
horizontal dimension of state, market, and society (community) and (2)
along the vertical dimension of supranational, national, and subnational
tiers of government.
The strengthening of the market (through privatization, deregulation,
contracting out of public services, etc.) is obviously the core tenet
of neoliberalism. But there is also a vast literature that has described
a move from government (i.e., state provision) to governance (i.e.,
the provision of public goods and services through bargaining systems
and policy networks that reunite state, economic and social actors).
Within these networks, community bonds and trust are crucial; state
actors, by strengthening these bonds and enforcing the rules on which
trust and cooperation are based, play an enabling role. Neocorporatist
bargaining systems of this kind and an enabling role of the state are
also among the political conditions that Piore and Sabel cite for the
success of flexible specialization.
The concept of a global-local nexus in the economic sphere is complemented
by the idea of a hollowing out of the nation state, with power and responsibilities
moving up and down. Yet the obstacles to macroeconomic regulation at
a supranational or even global scale are conspicuous, and hence particular
attention has been devoted to the subnational level as site of regulation.
This is where cities "come back in". According to our meta-narrative,
they are not only burdened with enhanced responsibilities by the new
economic and political context, but have also profited from increased
local autonomy which in turn has afforded them the opportunity to practice
innovative forms of urban governance. Hence entrepreneurial cities no
longer restrict themselves to the provision of infrastructures, the
administration of central welfare programs, or the field of social consumption.
They are increasingly active in various subfields of economic and labour
market policies, including export promotion and the "marketing of place",
and use a plethora of new instruments of which public-private partnerships
are particularly well documented.
Here again, one can distinguish between (1) a neoliberal (public-choice)
scenario in which the competition of urban jurisdictions is thought
to guarantee efficiency and local policies geared towards the needs
and interests of mobile capital and (2) a scenario that is based on
the concept of industrial districts. The latter scenario underlines
the importance of community and participation, and hence implies more
inclusive forms and more progressive contents of urban governance.

II

The
empirical and theoretical plausibility of the entire narrative presented
above, and of the localization hypothesis in particular, can be measured
against three benchmarks: (1) the extent to which it is able to validate
its claim that there is significant discontinuity before and after the
1970s; (2) the extent to which it can substantiate its claim that the
different economic and political trajectories of Western industrialized
countries (and cities therein) since the 1970s represent variations
on a single, post-Fordist and Schumpeterian model, based on the same
underlying logic of regulation; and (3) - tieing these points together
- the extent to which it offers a convincing theorization of the forces
and mechanisms that explain stability vs. change and the emergence of
universal solutions to problems of micro- and macroeconomic regulation
vs. national variation. This last point raises the additional question
if the narrative presents a convincing theoretical linkage between economic
and political spheres.
The ambiguities and contradictions with regard to (1) and (2) are starkly
illustrated by the gap between optimistic and pessimistic scenarios
of the post-Fordist and Schumpeterian era. While only few authors would
question or deny "head on" the claim that globalization represents a
new and highly consequential aspect of the post-1970s, or that we currently
observe the crisis and transformation of the Keynesian welfare state
and national macroeconomic regulation, there is nevertheless more disagreement
on the scope and meaning of these trends than one would think. A look
at the localization hypothesis illustrates this particularly well.
In the pessimistic scenario, processes of globalization driven by the
neo-Fordist accumulation strategies of transnational corporations are
seen as central, while state restructuring is perceived as largely based
on the neoliberal agenda. In such a context, increased local autonomy
is the privilege of the few world cities, while the scope and contents
of innovation in urban governance are dictated by market imperatives.
The optimistic scenario, by contrast, presents a discourse of "hope"
according to which economic and labour market policies implemented by
the local state can foster a progressive, generalizable and sustainable
alternative both to obsolete Keynesian and to discredited neoliberal
strategies - an alternative that supports growth together with social
equity, more genuine democratic participation, and quality of life.
The fact that the sources on which our meta-narrative is based do not
give strong clues as to which scenario will ultimately prevail, or which
factors might be conducive to either one of them in a particular national,
regional or local context, points both to empirical and theoretical
deficits. It is hardly very helpful in this respect if much of the literature
underlines the "openness" of the economic and political transition whose
elements it analyzes - this transition period has been under way for
thirty years now, about as long as the Fordist-Keynesian paradigm is
thought to have reigned, and hence stressing "openness" amounts to admitting
that we do not know very much about where we are going. The literature
that I draw on has so far privileged the general over the specific,
and has thus neglected empirical research testing its hypotheses in
a sytematic fashion. But despite its claims to the contrary, this literature
also has a definite streak of economic determinism and functionalism.
Economic structures and trends are privileged to the detriment of political
actors and institutions - and, by implication, global developments to
the detriment of local factors. The important role of historical path
dependence and variations in local (regional, national) contexts are
obscured.

III

By
contrast, I argue that political institutions in general and local ones
in particular matter and thus have a discernible, if sometimes marginal,
impact on trends in local autonomy and the forms of urban governance
in specific cities. Here I obviously adopt the theoretical stances of
the new institutionalism, which began its rise to prominence at about
the same time as the localization hypothesis was formulated in the context
of our meta-narrative. Concepts of the new institutionalism have to
some extent been integrated by urban scholars over the last couple of
years, but a full reception of these ideas has not yet occurred.
Thus the elaboration and empirical use of the local state and local
autonomy as analytical concepts have made some progress and yielded
important results. Within a horizontally and vertically fragmented and
disaggregated state, the local tier plays a distinct role and profits
from some autonomy even though it is often narrowly circumscribed. The
distinction between type I and II autonomy, both of which are multidimensional
concepts themselves, is now widely used in the literature: type I here
stands for the autonomy of local government from economic and social
forces and actors, type II for the autonomy from upper tiers of government.
That type I restrictions on local autonomy and state capacity are crucial
is a staple of most of the urban scholarship from the community power
debate to neo-Marxist, growth-machine and urban-regime approaches. This
stream of scholarship has amply confirmed the over-riding importance
of capitalism and business interests for urban governance, but has also
shown that there is room for variations in urban regimes from boosterim
to progressive and anti-growth regimes. The formal-descriptive study
of type II restrictions was a staple of the old institutionalism in
local government research; a more differentiated and dynamic perspective
on the polity, politics, and policy dimensions of type II autonomy is
not yet well developed, though. And finally, there is still not much
interest for genuinely local (metropolitan and city-level) variations
in institutional arrangements and their impact on local autonomy and
state capacity.
Bringing these aspects together in a more systematic way is therefore
crucial if we want to learn more about the economic and political factors
that have influenced local autonomy and the forms of urban governance
since the 1970s. The relatively limited historical and comparative evidence
we have to date suggests that local institutional arrangements, together
with the context circumscribed by the type I and II dimensions, might
indeed have a role to play in making urban regimes more or less efficient
and inclusive. In my own research I attempt to substantiate this claim
with examples from the USA and Canada - two countries that offer huge
variations across space and over time in local arrangements and their
context. And the experience of the American progressive reform movement
and its reception in Canada provides a telling confirmation for the
claim that institutions matter - or at least that they did matter during
the Fordist-Keynesian era.